Online trading is done via the electronic connection. Basically, it is the buying and selling of securities. According to a senior financial analyst at Olsson Capital, companies and individuals in this type of trading make huge profits while they sit in an air-conditioned room on a comfortable sofa with a laptop on.
However, it is not as simple as it seems, you might notice the stress and sweat on their face. There are many complexities and some learning has to be done before taking individual steps into the world of online trading.
To become a successful trader who gets delighted after every deal he makes, one needs to know the basics and also the complexities. Buckle up, read carefully, because you are going to learn some information that will go a long way on this road of online trading with you. Let’s get started.
Basics of the stock market
Long ago, there used to be a broker to make the dealings and buy and sell the stock. However, now it can be done via the internet in a matter of few seconds and clicks. So how does this work? The stock markets work on the principle of the supply and demand. The traders bid up the sales price.
The shares prices are directly proportional to the company’s value. The stock prices change over time and investors can predict them as well.
Choosing the right stock
Before you buy or sell a stock, you need to do some digging into the company you are going to make the deal from. There are two types of analysis that are to be done.
First, the fundamental analysis has to be done, which involves looking into the history of the company. Check the balance reports, yearly and monthly profits and losses and how satisfied are other investors from this company.
Luck is not to be waited for on a chance it is to be made in this stock game. Secondly, technical analysis has to be done. It is to do with moving averages to track security prices. This helps to identify the trends.
Over time, due to the experience in the field, the traders can make very accurate predictions about the stock prices. And most of the time they are right. So choose a stock by fundamental and technical analysis of the company.
As mentioned earlier, the technical analysis predicts the pattern of stock rates. There is a high boundary which the stock surpasses rarely; this is known as the resistance. And the low boundary is called the support. Another common pattern is the head and shoulder.
In this pattern, prices fluctuate up and down. At one them it is at the peak and the next it drops and the pattern continues till it reaches the similar height to the first, ending with an upward price trend. This can go another way as well which might end up in a downward price trend.
A trader or an investor?
Don’t get confused between the two. An investor is looking for a long-term profit; he seeks to find a company with a market place that is prominent enough, this is a slow and steady work which makes the use of fundamental analysis. On the flip side, a trader will look for short-term profit typically using the technical analysis.
Choose a broker
When entering the online trading world, do not look for advice from people who are not even directly involved in it such as your friends or family. In fact, get yourself a trusted broker. The broker will guide you when you make a purchase and when to sale. He is the one who will keep you updated with all the trends.
Play a simulated stock game
This might sound ridiculous but playing a simulated stock gain can give you some practice before you actually invest your money into something very big. There is no risk in this game and you can learn a lot of experience from playing these games.
You can try Wall Street survivor and market watch. These will help you get some insight into online trading. However, earning in a simulated environment is easier than earning real life, so do not think it is all real.
So these were some basics that can help you start getting into the online trading world.